Displaying items by tag: europe

(New York)

One of the key story lines that has been driving global equities gains over the last year and a half is that economic growth has finally returned to all corners of the world. Yet just as that story was becoming very believable, it is starting to fade. Global benchmarks for measuring growth have fallen undeniably since January, especially in Europe, and inflation is cooling in developed economies, both signs that the boom in expansion might have come to an end. Everything from shipping costs to copper prices have fallen as demand has waned.

FINSUM: Are we headed towards a global recession? It is always hard to forecast, but it seems as though we may be.

(New York)

As if higher rates and Europe weren’t enough, there are plenty of other dangers currently weighing on the stock market. The two big ones are a potential trade war—sparked by Trump’s proposed tariffs on metals and beyond—which could lead to a bitter battle between the US and Europe or the US and China. The other big risk is FAANG, or big tech, regulation. Tech stocks have become such a stalwart of the market, that regulations reigning them in could prompt major losses.

FINSUM: The market does appear ripe for some regulation of tech stocks. GDPR just passed in Europe and the political climate seems ready for some regulation, but we believe it is still more likely that nothing happens.

(Madrid)

In what seems to be a spread of European unrest, Spain’s Parliament voted today to remove the country’s PM, Mariano Rajoy, who has been in power for seven years. While the reasons for his ouster are very different than in Italy, the move will add pressure to a European continent that is plagued by political unrest. Rajoy’s party was plagued by a corruption scandal, which seems to have ultimately undone the PM. He will be replaced by a PM from the Socialist party.

FINSUM: The worry we have here is that the socialist party may undo a lot of the budgetary gains that have been made during austerity—not totally dissimilar to Italy in effect. Then again, at least they are not Euro sceptics.

(New York)

Over the last few weeks the US stock market had looked strong. Stocks had shrugged off a number of geopolitical disturbances with relative ease. However, suddenly, a lot of macro signs are looking poor. The combination of European political turmoil, weaker growth, and a sudden drop in US bond yields, are all coming together in a package that shows things are not as rosy as they might have seemed a few weeks ago. While European sovereign spreads are widening to the largest since 2013, US Treasury yields are plunging and are now well below 2.9%.

FINSUM: This might be the start of a very rough summer for markets, and how fitting that it all began on Memorial day. While some might say “It’s just Italy”, Europe has proved enough to scuttle global markets in the past (see the summers of 2011 and 2012).

(Washington)

Over the last several weeks, the market has gone through various fits of panic over whether a global trade war, sparked by the US, might imperil the global economy. However, over that period, sentiment has generally improved, with most investors now thinking a trade war unlikely. That view may be far off the mark, as two major disagreements are worsening. The first is between the US and Europe, on whom Trump may impose additionally steel tariffs imminently. Europeans have vowed to retaliate. With China, the situation is eve more worrisome, as the country has refused to even respond to Trump’s requests tha it slash $100 bn from its trade surplus with the US and lessen its backing for industrial upgrades.

FINSUM: China seems to feel it is finally big enough to stand up to the US. It is probably correct, which means we may end up in a big standoff with Beijing. Here is the big question though—will that ultimately (e.g. 3-plus years from now) be bad for the US economy?